FOR IMMEDIATE RELEASE CIV

MONDAY, NOVEMBER 7, 2005 (202) 514-2007

WWW.USDOJ.GOV TDD (202) 514-1888

JUSTICE DEPARTMENT
RECOVERS $1.4 BILLION IN
FRAUD & FALSE CLAIMS IN
FISCAL YEAR 2005; MORE THAN
$15 BILLION SINCE 1986
WASHINGTON, D.C. - The United States obtained over $1.4 billion in settlements
and judgments in the fiscal year ending September 30, 2005, pursuing allegations of
fraud against the federal government, the Justice Department announced today. This
brings total recoveries since 1986, when Congress substantially strengthened the
civil False Claims Act, to $15 billion. “This year's outstanding recoveries in civil
fraud cases demonstrate this Administration's unwavering commitment to root out
government fraud and to ensure that citizens' tax dollars are well spent,” said Peter
Keisler, Assistant Attorney General for the Department’s Civil Division. “It also
attests to the fortitude of whistle-blowers who report fraud and the tireless efforts of
the civil servants who investigate and prosecute these cases, from Justice's Civil
Division, the U.S. Attorney's Offices, and other agencies." Mr. Keisler also paid
tribute to Senator Charles Grassley of Iowa and Representative Howard L. Berman
of California who sponsored the 1986 amendments to the False Claims Act, the
government's primary weapon to fight government fraud. "Without this important
legislation strengthening the Act and, in particular, the qui tam provisions which
give ordinary citizens the courage and protection to blow the whistle on government
fraud, such recoveries would not have been possible." Of the $1.4 billion, $1.1
billion is associated with suits initiated by whistle-blowers under the False Claims
Act's qui tam provisions. These provisions authorize individuals, known as relators,
to file suit on behalf of the United States against those who have falsely or
fraudulently claimed federal funds. Such cases run the gamut of federally funded
programs from Medicare and Medicaid to defense contracts, disaster assistance
loans, and agricultural subsidies. Persons who claim federal funds they know they
aren’t entitled to are liable for three times the government’s loss plus a civil penalty
of $5,500 to $11,000 for each false claim. If the government intervenes in a qui tam
action, the person who filed the suit can recover from 15 to 25 percent of any
settlement or judgment attributable to the fraud identified by the whistleblower. The
relator’s share increases up to 30 percent if the United States declines to intervene
and the whistleblower pursues the action alone. In fiscal year 2005, whistle-blowers
were awarded $166 million. As in the last several years, health care accounted for
the lion's share of fraud settlements and judgments-$1.1 billion. The Department of
Health and Human Services reaped the biggest recoveries, largely attributable to its
Medicare and Medicaid Programs. Substantial recoveries were also made by the
Office of Personnel Management which administers the Federal Employees Health
Benefits Program, the Department of Defense for its TRICARE insurance program,
the Department of Veterans Affairs and the Railroad Retirement Board. Outside the
health care arena, Department of Defense procurement fraud accounted for over
$112 million in settlement and judgment awards, with another $41.9 million
recovered from PriceWaterhouseCoopers, L.L.P., for alleged false claims for travel
expenses in connection with its contracts with numerous federal agencies, and $30.5
million from Harvard University and its agents in connection with a United States
Agency for International Development agreement to advise Russia in its transition
to a market economy. Among the most significant recoveries in fiscal year 2005
were: • $327 million from HealthSouth Corporation to settle allegations of fraud
against Medicare and other federally insured health care programs. The United
States alleged that HealthSouth, the nation’s largest provider of rehabilitative
medicine services, engaged in three major schemes to defraud the government. The
first, comprising $170 million of the settlement amount, resolved Health South’s
alleged false claims for outpatient physical therapy services that were not properly
supported by certified plans of care, administered by licensed physical therapists or
for one-on-one therapy as represented. Another $65 million resolved claims that
HealthSouth engaged in accounting fraud which resulted in overbilling Medicare on
hospital cost reports and home office cost statements. The remaining $92 million
resolved allegations of billing Medicare for a range of unallowable costs, such as
lavish entertainment and travel expenses incurred for HealthSouth's annual
administrators' meeting at Disney World, and other claims. Government-initiated
claims accounted for $251 million of the settlement amount, with the remaining $76
million attributable to four qui tam law suits. Five relators received $12.6 million
for their contributions to the litigation. HealthSouth also entered into a corporate
integrity agreement with the Inspector General of HHS to prevent future
misconduct. • $310 million from Gambro Healthcare for false claims for Medicare
and Medicaid in connection with dialysis services. Allegations against Gambro
included providing home dialysis patients with equipment and supplies through a
sham durable medical equipment company to increase Medicare reimbursement,
billing for phantom supplies, billing for ancillary medications and services that were
not medically necessary-a requirement for Medicare reimbursement, and paying
kickbacks to physicians for referring patients to Gambro clinics in violation of the
Medicare Anti-Kickback Act. The company also paid $15 million to resolve state
Medicaid liabilities and paid a $25 million criminal fine. • $140 million from
GlaxoSmithKline to settle allegations of fraudulent drug pricing and marketing that
resulted in inflated claims to Medicare, Medicaid, and other federally funded health
care programs. The government alleged that GlaxoSmithKline, one of the world’s
largest pharmaceutical manufacturers, reported inflated prices for the drugs Zofran
and Kytril, knowing that those prices would be used by federal programs to set
reimbursement rates. The company used the artificial spread between the reported,
inflated prices and its customers’ significantly lower actual cost to purchase the
drugs as a marketing tool. Zofran and Kytril are anti-emetic drugs used primarily to
reduce the negative side effects of radiation and other cancer treatments. The
settlement was the result of a qui tam suit filed by Ven-A-Care of Florida Keys,
Inc., a small home-infusion company, and its principals. In addition to the $140
million federal share of the recovery, GlaxoSmithKline paid $10 million to
reimburse state Medicaid funds. • $138.5 million from AdvancePCS, a subsidiary of
Caremark, Inc. in the pharmacy benefit management business, to resolve allegations
that AdvancePCS exacted kickbacks, disguised as administrative fees and sales and
service agreements, from drug manufacturers in exchange for marketing their drugs
to providers reimbursed by federally insured health programs; and accepted
kickbacks in the form of cash payments and rebates from drug manufacturers in
exchange for marketing their drugs to providers reimbursed by federally insured
health programs. Additionally, it was alleged the company paid kickbacks to
providers reimbursed by federally insured health programs to ensure that
AdvancePCS was selected or retained as the pharmacy benefit manager for the
health plans.

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